First Resources

First Resources: First Resources' 4Q14 net profit slumped 31% y/y to US$59.2m, on a 1.4% decline in revenue to US$176.7m, bringing FY14 earnings and revenue to US$173.4m (-27%) and US$615.5m (-1.8%), respectively. Excluding fair value changes of biological assets, FY14 core net profit dropped 20.9% to US$171.6m, slightly above street estimates.

For the quarter, top line slipped from lower average selling prices of CPO and refined products, but partially offset by greater sales volumes from the refinery and processing segment (+40%), as the group expanded its processing capacity.

EBITDA margin slipped 0.2 ppt to 53.6%, while bottom line was further dragged by lower fair value gains on biological assets (-93.4%) and derivative instruments (-93.5%).

Management proposed a final DPS of 2.3¢, bringing FY14 total to 3.55¢ (FY13: 4.5¢).

While CPO prices are likely to remain moderated, weighed by relative pricing against crude oil and soybean oil, recent developments in Indonesia’s mandatory biodiesel policy should provide support to prices by sustaining domestic demand.

In 2015, management expects stronger production volumes due to yield recovery and contribution from newly mature plantations, which should translate into higher earnings.

For now, the street is still bullish on the counter, with 13 Buys and 3 Sells with average 12-month TP of $2.42.

At $1.855, First Resources is priced at 11x forward earnings and 2x P/B, compared to Indonesian peers' average of 12.9x and 1.6x, respectively.